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State tracks more angel investment, at least $19M last year

Madison, Wis. — Angel investments in 2005 added up to more than $19 million across 40 deals — potentially much more, according to a report released on Wednesday.

The investor tax credits offered through Act 255 have let Wisconsin, for the first time, start to officially track the volume of investments by individuals. "Even though it's not entirely complete, it's the first good picture we've had of what's going on in the individual sector," said David Ward, president of NorthStar Economics, the Madison research firm that compiled the report.

Nationally, Ward sees angel investing beginning to eclipse venture capital, which has held mostly steady but not significantly increased in the last few years. In 2004, the latest year tracked by the report, estimated total venture and angel investments were $20.9 billion and $22.5 billion, respectively.

That would put Wisconsin's share at around a thousandth of the national total. But the situation here is improving: investments by organized angel groups are up, to $5.4 million in 2005 from about $1.5 million in 2002. Individual investments, which totaled at least $14 million in 2005, may be up proportionally. Wisconsin will be better able to measure them with its new Act 255 data going forward.

Angel investments are private and aren't regularly recorded at the state or national level. The activity of organized angel groups is easier to track, through surveys of their managing directors or major partners, but Ward estimates that individuals may invest six or seven times as much as these groups do.
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There were 11 organized angel groups that made actual investments in 2005, according to the annual report of the Wisconsin Angel Network, a public-private partnership. Those groups represented some 200 or more individuals. Five of the groups were newly created last year.

"I think the tax credits brought a focus to angel investing we hadn't had before," Ward said.

Dick Leazer, manager of the Madison angel group Wisconsin Investment Partners, said he sees the growth of angel investing following several other factors as well:

• The rise of the stock market and overall investor confidence.

• Positive ripples from the sale of Madison-based Bone Care to Genzyme last year for $600 million. Bone Care went public in 1996.

• Established angel networks spreading information and encouragement.

State senator Ted Kanavas, R-Brookfield, said the data shows Wisconsin can "grow its own" investment base. "We don't have to depend on the coasts," he said.

Related story: Mithridion raises $1.6M through angel networks

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